This seminar paper is divided in the following chapters:
1. Definition of Value at Risk: What is VaR, several definitions of this figure.
2. The three common approaches for calculating Value at Risk: Historical simulation,
Monte Carlo simulation, Variance-Covariance model.
3. The critical view: Problems and limitations of Value at Risk. Which approach can be meaningfully used and when not? Why is Value at Risk not the “only truth” in financial institutions? What are the strengths and weaknesses of the several approaches in calculating Value at Risk?
TABLE OF CONTENT
I. INTRODUCTION: WHAT I AM GOING TO TALK ABOUT?
II. DEFINITION OF VALUE AT RISK
III. HOWTO CALCULATEVALUEATRISK-THECOMMON APPROACHES
III.1. Variance-Covariance model
III.2. Historical Simulation
III.3. Monte Carlo Simulation
IV. SUMMARY-PROBLEMS AND CRITICS
IV.l. Problems of Value at Risk
IV.2. Value at Risk: And beyond?
IV.3 Overview: Advantages and problems of the VaR calculations
V: FINALLY: WHICH WAY IS THE BEST?
LIST OF LITERATURE
LISTOFTABLES
LISTOF FIGURES
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